UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, DC 20549





FORM 10-Q /A


Amendment No. 1





[X]
Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the quarterly period ended September 30, 2010[  ]
Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934For the transition period from __________  to__________Commission File Number:  333-150692





Sunvalley Solar, Inc.


(Exact name of registrant as specified in its charter)





Nevada
20-8415633(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification No.)





398 Lemon Creek Dr., Suite A, Walnut, CA 91789(Address of principal executive offices)





(909) 598-0618(Registrant’s telephone number)_____________________________________________________________________(Former name, former address and former fiscal year, if changed since last report)


Indicated by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days [X] Yes    [ ] No





Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.





[ ] Large accelerated filer

[ ] Non-accelerated filer
[ ] Accelerated filer

[X] Smaller reporting company





Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes   [X] No





State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:  800,068,420 common shares as of November 11, 2010.





Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [  ] No [X]




Table of Contents





TABLE OF CONTENTS
PagePART I – FINANCIAL INFORMATIONItem 1:
Financial Statements
3Item 2:
Management’s Discussion and Analysis of Financial Condition and Results of Operations
4Item 3:
Quantitative and Qualitative Disclosures About Market Risk
13Item 4:
Controls and Procedures
13PART II – OTHER INFORMATIONItem 1:
Legal Proceedings
14Item 1A:
Risk Factors
14Item 2:
Unregistered Sales of Equity Securities and Use of Proceeds
14Item 3:
Defaults Upon Senior Securities
14Item 4:
Removed and Reserved
14Item 5:
Other Information
14Item 6:
Exhibits
14


2
 Table of Contents


PART I - FINANCIAL INFORMATION





Item 1.     Financial Statements





Our financial statements included in this Form 10-Q are as follows:F-1
Consolidated Balance Sheets as of September 30, 2010 (unaudited) and December 31, 2009;F-2
Consolidated Statements of Operations for the three and nine months ended September 30, 2010 and 2009 (unaudited);F-3
Consolidated Statements of Stockholders’ Equity as of September 30, 2010 (unaudited);F-4
Consolidated Statements of Cash Flows for the nine months ended September 30, 2010 and 2009 (unaudited);F-5
Consolidated Notes to Financial Statements.




These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q.  In the opinion of management, all adjustments considered necessary for a fair presentation have been included.  Operating results for the interim period ended September 30, 2010 are not necessarily indicative of the results that can be expected for the full year.




3
 Table of Contents




SUNVALLEY SOLAR, INC. Consolidated Balance Sheets
  ASSETSSeptember 30,


December 31,2010


2009(Unaudited)CURRENT ASSETSCash and cash equivalents
$
624,228


$
309,453Accounts receivable, net

415,313



295,278Inventory

1,114,903



3,344,866Other receivables

32,271



65,378Prepaid expenses and other current assets

10,609



1,527Total current assets

2,197,324



4,016,502PROPERTY AND EQUIPMENT, NET

47,811



56,853OTHER ASSETSOther assets

18,686



16,936Total other assets

18,686



16,936TOTAL ASSETS
$
2,263,821


$
4,090,291LIABILITIES AND STOCKHOLDERS' EQUITYCURRENT LIABILITIESAccounts payable and accrued expenses
$
2,041,979


$
3,405,207Bank overdraft

16,824



-Accrued warranty

26,535



22,833Current portion of long-term debt

13,059



8,178Notes payable to related party

175,000



175,000Customer deposits

115,517



93,555Total current liabilities

2,388,914



3,704,773LONG-TERM LIABILITIESNotes payable

77,658



91,822Total long-term liabilities

77,658



91,822TOTAL LIABILITIES

2,466,572



3,796,595STOCKHOLDERS' EQUITYCommon stock, $0.001 par value, 1,000,000,000 shares authorized, 800,068,420 and 485,151,406 sharesissued and outstanding, respectively

800,068



485,151Additional paid-in capital

(123,287
)


391,630Retained earnings (deficit)

(879,532
)


(583,085
)Total Stockholders' Equity

(202,751
)


293,696TOTAL LIABILITIES ANDSTOCKHOLDERS' EQUITY
$
2,263,821


$
4,090,291


The accompanying notes are an integral part of these financial statements.




F-1
 Table of Contents




SUNVALLEY SOLAR, INC. Consolidated Statements of Operations
   For the Three Months Ended


For the Nine Months EndedSeptember 30,


September 30,2010


2009


2010


2009REVENUES
$
1,241,810


$
876,054


$
3,312,977


$
2,474,633COST OF SALES

1,004,069



788,913



2,783,366



2,108,477GROSS PROFIT

237,741



87,141



529,611



366,156OPERATING EXPENSESSalary and wage expense

169,242



128,717



421,278



375,081Bad debt expense

-



-



37,320



-Selling, general andadministrative expenses

99,624



133,315



355,702



403,215Total operating expenses

268,866



262,032



814,300



778,296INCOME (LOSS) FROM OPERATIONS

(31,125
)


(174,891
)


(284,689
)


(412,140
)OTHER INCOME (EXPENSES)Other income

624



40,247



2,324



40,823Interest income (expense), net

(4,905
)


(4,851
)


(14,082
)


(13,396
)Total other income (expenses)

(4,281
)


35,396



(11,758
)


27,427INCOME (LOSS) BEFORE TAXES

(35,406
)


(139,495
)


(296,447
)


(384,713
)Provision for income taxes

-



-



-



-NET INCOME (LOSS)
$
(35,406
)

$
(139,495
)

$
(296,447
)

$
(384,713
)INCOME (LOSS) PER SHAREBasic and diluted
$
(0.00
)

$
(0.00
)

$
(0.00
)

$
(0.00
)WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDINGBasic and diluted

800,068,420



485,151,406



597,186,265



485,572,589


The accompanying notes are an integral part of these financial statements.




F-2
 Table of Contents




SUNVALLEY SOLAR, INC.


Consolidated Statements of Stockholders' Equity
 (unaudited)
  Common Stock


Additional


AccumulatedShares

Amount


Paid-In Capital


Deficit


TotalBalance at December 31, 2008
488,984,171

$
488,984


$
387,797


$
4,774


$
881,555Retirement of common stock
(3,832,765
)

(3,833
)


3,833Net loss
-


-



-



(587,859
)


(587,859
)Balance at December 31, 2009
485,151,406


485,151



391,630



(583,085
)


293,696Repurchase of common stock (unaudited)
(5,110,353
)

(5,110
)


(194,890
)


-



(200,000
)Recapiltalization (unaudited)
320,027,367


320,027



(320,027
)


-



-Net loss for the nine monthsended September 30, 2010

(unaudited)
-


-



-



(296,447
)


(296,447
)Balance at September 30, 2010 (unaudited)
800,068,420

$
800,069


$
(123,288
)

$
(879,532
)

$
(202,751
)


The accompanying notes are an integral part of these financial statements.




F-3
 Table of Contents




SUNVALLEY SOLAR, INC.
 Consolidated Statements of Cash Flows
   For the Nine Months EndedSeptember 30,2010


2009OPERATING ACTIVITIES:Net income (loss)
$
(296,447
)

$
(384,713
)Adjustments to reconcile net income (loss) to net cashprovided by operating activities:Depreciation and amortization

10,192



10,555Changes in operating assets and liabilities:(Increase) decrease in accounts receivable

(120,035
)


(247,950
)(Increase) decrease in inventory

2,229,963



(2,031,536
)(Increase) decrease in prepaid expenses and other assets

(9,082
)


212,985(Increase) decrease in other receivable

33,107



(92,765
)(Increase) decrease in deferred financing costs

-



(13,500
)Increase (decrease) in accounts payable and accrued warranty expenses

(1,359,526
)


2,259,184Increase (decrease) in other assets

(1,750
)


-Increase (decrease) in customer deposits

21,962



(104,606
)Net Cash (Used) in Operating Activities

508,384



(392,346
)INVESTING ACTIVITIES:Purchase in property and equipment

(1,150
)


(8,205
)Net Cash (Used) in Investing Activities

(1,150
)


(8,205
)FINANCING ACTIVITIES:Proceeds from notes payable

-



100,000Repayment of related party notes payable

-



(25,000
)Repayments from notes payable

(9,283
)


-Bank overdraft

16,824



-Repurchase of common stock

(200,000
)


-Collection of realted party receivables

-



-Net Cash Provided by Financing Activities

(192,459
)


75,000-



-NET DECREASE IN CASH

314,775



(325,551
)CASH AT BEGINNING OF PERIOD

309,453



367,218CASH AT END OF PERIOD
$
624,228



41,667SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:CASH PAID FOR:Interest
$
6,045


$
11,862Income taxes
$
800


$
800NON-CASH INVESTING AND FINANCING ACTIVITIES
$
-


$
-




The accompanying notes are an integral part of these financial statements.


F-4
 Table of Contents


SUNVALLEY SOLAR, INC.


Consolidated Notes to Financial Statements


September 30, 2010 and December 31, 2009




NOTE 1 - CONDENSED FINANCIAL STATEMENTS


The accompanying financial statements have been prepared by the Company without audit.  In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at September 30, 2010, and for all periods presented herein, have been made.
 
 Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted.  It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 2009 audited financial statements.  The results of operations for the periods ended September 30, 2010 and 2009 are not necessarily indicative of the operating results for the full years.
 
 NOTE 2 - GOING CONCERN
 
 The Company's financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
 
 In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. However management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.
 
 The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
 
 NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES
 
 Use of Estimates
 The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.
 
 Recent Accounting Pronouncements
 Management has considered all recent accounting pronouncements issued since the last audit of our financial statements. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.
  Inventory
 Inventory is stated at the lower of cost or net realizable value. Cost is determined on an average cost basis; and the inventory is comprised of raw materials and finished goods. Raw materials consist of fittings and other components necessary to assemble the Company’s finished goods.  Finished goods consist of solar panels ready for installation and delivery to customers.


F-5
 Table of Contents


SUNVALLEY SOLAR, INC.


Consolidated Notes to Financial Statements


September 30, 2010 and December 31, 2009




NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  The Company’s inventory consisted of the following at September 30, 2010 and December 31, 2009:
  September 30,

2010

December 31,

2009Raw materials
$
15,106

$
309,494Work in Progress

1,965


13,972Finished goods

1,097,832


3,021,400$
1,114,903

$
3,344,866
 
 NOTE 4 - RELATED PARTY TRANSACTIONS
 
 The Company owes $175,000 of short-term unsecured loans to shareholders with maturity dates ranging from 60 to 90 days bearing an interest rate of 6.5%.
 
 NOTE 5 – COMMON STOCK
 
 During the nine months ended September 30, 2010, the Company entered into agreements to repurchase a total of 5,110,353 (200,000 pre-split) common stock shares from shareholders at a price of $1.00 per share.  As of September 30, 2010, the Company had received all of the stock certificates and had paid the investors in full.
 
 NOTE 6 – SIGNIFICANT EVENTS
 
 On June 24, 2010, in accordance with the Exchange Agreement dated June 24, 2010 Western Ridge Minerals acquired all of the issued and outstanding shares of Sunvalley, which resulted in Sunvalley becoming a wholly-owned subsidiary.  In exchange for all of the issued and outstanding shares of Sunvalley, the shareholders of Sunvalley received a total of 480,041,053 (2,514,600 pre-split) shares of Western Ridge Mineral’s common stock, which represented approximately 60% of the Company’s outstanding common stock following the Acquisition. There were 1,049,271,312 (5,496,400 pre-split) shares of our common stock outstanding before giving effect to the stock issuances in the Acquisition and the cancellation of 729,243,944 (3,820,000 pre-split) shares by Mr. Marco Bastidas and certain other shareholders resulted in there being 800,068,420 (4,191,000 pre-split) shares outstanding post acquisition.  As a result, the shareholders of the Company became the controlling shareholders of the combined entity.
 
 Accordingly, the transaction is accounted for as a recapitalization with Sunvalley deemed to be the accounting acquirer and Western Ridge Mineral the legal acquirer in the reverse acquisition. Consequently, the assets and liabilities and the historical operations of Sunvalley prior to the Merger are reflected in the financial statements and are recorded at the historical cost basis of Sunvalley. The Company’s consolidated financial statements after completion of the Acquisition include the assets and liabilities of both companies. Following the Acquisition our fiscal year-end has been changed from March 31 to December 31.
  F-6
 Table of Contents
 SUNVALLEY SOLAR, INC.


Consolidated Notes to Financial Statements
 September 30, 2010 and December 31, 2009




NOTE 6 – SIGNIFICANT EVENTS (CONTINUED)
 
 In addition, pursuant to the terms and conditions of the Exchange Agreement, the Company’s sole officer and director immediately prior to the Acquisition, Marco Bastidas, resigned from the board and from all offices.  The Company’s board of directors was reconstituted to consist of Zhijian (James) Zhang, Hangbo (Henry) Yu, and Anyork Lee who, prior to the Acquisition, were the directors of Sunvalley.  The Company’s board appointed thefollowing new officers and directors, each of who had served in the same capacity as an officer of Sunvalley prior to the acquisition:
 ·
Zhijian (James) Zhang, President and Chief Executive Officer
 ·
Mandy Chung, Chief Financial Officer, Secretary, and Treasurer
 ·
Hangbo (Henry) Yu, General Manager
 ·
Fang Xu, Chief Technology Officer
 ·
Shirley Liao, Director of Administration
 ·
All directors hold office for one-year terms until the election and qualification of their successors. Officers are elected by the board of directors and serve at the discretion of the board.
 
 Concurrently with the Acquisition, our former sole officer and director, Marco Bastidas, received a transfer of all assets and agreed to assume all liabilities related to our pre-acquisition business.  Following the Acquisition, we intend to carry on the business of Sunvalley as our primary line of business.
 
 On July 20, 2010 the Company’s board of directors approved a 19.0885235 for 1 forward stock split of the Company’s common stock.  On August 23, 2010 the Company’s board of directors approved a 10 for 1 forward stock split of the Company’s common stock.  The Company’s authorized common stock was increased to 1,000,000,000.  This forward splits have been retroactively applied and is reflected in the financial statements for the period ended September 30, 2010.
 
 NOTE 7 – SUBSEQUENT EVENTS
 
 In accordance with ASC 855, Company management reviewed all material events through the date of this report and there are no material subsequent events to report .


F-7
 Table of Contents





Item 2.     Management’s Discussion and Analysis or Plan of Operation





Forward-Looking Statements





Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements.” These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions.  Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain.  Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.




Company Overview and Plan of Operation





We are a California-based solar power technology and system integration company. Since the inception of our business in 2007, we have focused on developing our expertise and proprietary technology to install residential, commercial and governmental solar power systems. We offer turnkey solar system solutions for owners, builders and architecture firms that include designing, building, operating, monitoring and maintaining solar power systems. Our customers range from small private residences to large commercial solar power users. We have the necessary licenses and expertise to design and install large scale solar power systems. We hold a C-46 Solar License from CBCL (California Board of Contractor License). Some of the large scale commercial solar power systems that we have designed and installed include large office buildings, manufacturing facilities and warehouses. Our proprietary technologies in solar installation provide its customers with a high quality, low cost and flexible solar power system solutions.





We seek to continue our development as an end-to-end solar energy solution provider by providing system solution, post-sale service, customer technical support, solar system design and field installation.





4
 Table of Contents





Principal Products and Services





Our philosophy is to “provide solar electricity directly from the sun in a technology innovation-centric and cost effective way”. Since inception, the company has concentrated on serving the solar power needs of residential and commercial customers tied to the electric power grid.  Our business plans are focused in four specific areas:





·
Solar Systems Design and Installation


·
Solar Technology Research and Development


·
Solar Equipment Manufacturing and Distribution


·
Roof Top Power Plant Projects





Business Development Plan





The primary components of our growth strategy are as follows:





·
Developing and commercializing our proprietary solar technologies including our coating and focusing technologies, racking and panel cleaning system. By deploying these new technologies into our photovoltaic (“PV”) panels and solar installation business, we hope to enhance the value provided to our customers and increase our profitability.





·
Promoting and enhancing our company’s brand and reputation in solar design and integration and expanding our installation business from Southern California to Northern California, Arizona or other states.





·
Developing a PV panel manufacturing capability to provide high efficiency and low cost solar panels to US market. This will complement our installation business and provide an implementation platform for our R&D.





·
Getting involved in the private power providing business (Roof-top Power Plants).  Developing this line of business will lead to higher profit margins and income to our business. In the future, this line of business could become one of our main income sources.




5
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Expansion of Installation Business




We are planning to expand our installation business from Southern California to Northern California, Arizona or other states in two to three years. We will continue to execute our marketing and sales strategy in Southern California and, with additional capital, will be able to expand our business to cover Northern California, Arizona or other states.  The planned expansion is expected to occur through acquiring smaller installation companies in these regions and/or through the establishment of subsidiaries in these states and boost our installation profits. Our current intention is to establish two new offices located in Northern California or other states and in San Diego. The estimated start-up cost for each new branch would be approximately $500,000.





If we are able to expand our installation business, it will assist us in gaining favorable terms from OEM international manufacturers of our planned solar panel manufacturing operation.  In addition, an expanded installation business would allow us to accelerate the introduction of our new technologies and solar parts and would generate additional revenue to fund initial investment in our planned Roof-top Power Plant (RDPP) business and to further fund our investments in R&D.





Commercialization of Research and Development





Prior to initiating our planned OEM manufacturing of Sunvalley-branded solar panels, we will need to commercialize our advanced panel technology through the design, fabrication, and characterization of a prototype solar cell.  The total expense for planned commercialization of our research and development will be approximately $500,000.The necessary equipment and facilities will be accessed from University of California, San Diego. The Nano3 clean room facilities in the school of Engineering at UCSD are equipped with state-of-the-art micro and nano fabrication equipment and facilities, and can be accessed by outside users with a $107 hourly fee.





The interference pattern that will be recorded in the solar cells will be obtained using an Argon laser operating at 362nm. This laser and its associated equipment is available to us through a special arrangement with the administration office in the University of California, San Diego, as well as the Ultrafast and Nano-scale Optics lab in the Department of Electrical and Computer Engineering in UCSD.





Other equipment will also be required, including coating machine for PV panel testing.





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Initiate OEM Manufacturing of Solar Panels





By leveraging our solar panel installation business and R&D, we plan to procure OEM solar panels from selected Chinese manufacturers and to market them in the U.S. under our own brand name. We will be responsible for R&D, quality control, customer service, sales and marketing activities, as well as panel certification in U.S.





The estimated OEM panel cost is less than $1.40 per watt. As a reference, currently, the lowest panel price is around $1.80 per watt (Mono-crystalline, Polycrystalline). We can use our own sale and installation platform to showcase the new panels and drive sales of the new panels in the U.S market. Meanwhile, we will continue our R&D effort on panel coating and other advanced technologies and apply the results to its panel manufacturing business. The goal will be to further improve the efficiency, lower the cost of solar panels with our proprietary technologies, and to grow our market share.





Our marketing strategy for our planned OEM solar panels is as follows:





·
Set-up a platform to showcase our innovative solar panel technologies and make Sunvalley solar panels a household name.





Unlike other merchandise, solar panel is very unique in that it requires very high level of quality assurance and customer satisfaction. Providing satisfactory customer service and technical support is absolutely vital in solar panel sales. As the first step, we will strive to make our brand a household name. Our solar panel will be used by our installation business as well as several other installation companies with which we have partnership. A marketing campaign aimed at other solar installation companies will help to achieve this goal. We plan to use our own installation business as the platform to showcase the product quality and build up consumer awareness of its brand.





·
Penetrate into the main stream distribution network





By leveraging early successes and customer trust earned from our initial installations, we plan to penetrate into the mainstream distribution network with our OEM solar panels.




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·
Further sale activities





Once our brand name solar panels become well known, our sales team will begin an aggressive marketing campaign to connect the individual sales points (distributors and venders) to form a distribution network. The marketing campaigns will also include attending trade shows, advertising in the media (TV commercials and newspaper advertisement) and designating local representatives to boost the market share and brand awareness.





·
Offer a low cost, high efficiency solar panel derived from advanced research





To boost our solar panel market share, our R&D team will work with our OEM partner to apply selective coating technique and other cutting edge technologies to further reduce the manufacturing cost and improve the panel efficiency.





The total capital required to initiate our planned panel manufacturing business would be approximately $2,000,000which can be categorized into three parts:





·
Registration and Certification of OEM panels with our brand – $300,000, including UL certification fees, CEC registration fees, and lab testing fees.





·
Initial Inventory – $1,500,000.  We will need to keep at least 4 containers of PV panels in the warehouse in order to support sales of 5~10M watts per year, which means we will need to have over $1,000,000 in inventory for PV panels only. An additional $300,000 in inventory would be needed in order to keep the requisite amount of inverters and racking and panel cleaning systems. In addition, we anticipate providing variable payment terms to different customers based on their creditworthiness; this will add additional cash flow pressure.





·
OEM Management costs – $200,000




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Develop Roof-top Power Plan Business





With our resources and experience gained from large scale solar power system designs, installation and other related business, we believe we have unique advantages in the design and installation of large roof-top power plant systems. We are aggressively proposing our Roof Top Power Plant (RTPP) solution to utility companies in Southern California. We believe that by collaborating with us on the RTPP approach, utility companies will benefit in the form of free installation, roof space, and our expertise on large commercial solar system designs, installation and maintenance services, as well as our technical and management experience. By collaborating with us, utility companies can help to achieve their alternative energy requirements under California law.





We are pursuing substantial contracts with some of our current installation customers who control or own over 2,000,000 square feet of roofs on warehouses or other buildings in Southern California. We are also seeking additional roof-top space agreements with other commercial customers. We are among the few companies in California that has the permit and expertise to install large-scale commercial and/or government solar power systems, together with roof constructional design and building interior/exterior electrical designs. We believe additional advantages are provided by our experience in filing solar power system permit applications and rebate applications and our expertise gained through our experience with governments and utility companies.





Expected Changes In Number of Employees, Plant, and Equipment





We do not currently plan to purchase specific additional physical plant and significant equipment within the immediate future.  We do not currently have specific plans to change the number of our employees during the next twelve months.





Results of Operations for the three and nine months ended September 30, 2010





During the three months ended September 30, 2010, we generated gross revenues of $1,241,810.  Total cost of sales was $1,004,069, resulting in gross profit of $237,741.  Selling, general, and administrative expenses were $99,624.  Salary and wage expenses were $169,242. We experienced interest expense of $4,905 and other income of $624.  The net loss for the three months ended September 30, 2010 was therefore $35,406. By comparison, we generated gross revenues of $876,054 during the three months ended September 30, 2009.  Total cost of sales was $788,913, resulting in gross profit of $87,141.  Selling, general, and administrative expenses were $133,315.  Salary and wage expenses were 128,717. We experienced interest expense of $4,851 and other income of $40,247.  The net loss for the three months ended September 30, 2009 was therefore $139,495.





During the nine months ended September 30, 2010, we generated gross revenues of $3,312,977.  Total cost of sales was $2,783,366, resulting in gross profit of $529,611.  Selling, general, and administrative expenses were $355,702.  Salary and wage expenses were $421,278.  Bad debt expense was $37,320. We experienced interest expense of $14,082 and other income of $2,324.  The net loss for the nine months ended September 30, 2010 was therefore $296,447. By comparison, we generated gross revenues of $2,474,633 during the nine months ended September 30, 2009.  Total cost of sales was $2,108,477, resulting in gross profit of $366,156.  Selling, general, and administrative expenses were $403,215.  Salary and wage expenses were $375,081.  We experienced interest expense of $13,396 and other income of $40,823.  The net loss for the nine months ended September 30, 2009 was therefore $384,713.




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Liquidity and Capital Resources





As of September 30, 2010, we had current assets in the amount of 2,197,324, consisting of cash in the amount of $624,228, accounts receivable of $415,313, inventory in the amount of $1,114,903, other receivables of $32,271, and prepaid expenses of $10,609.  As of September 30, 2010, we had current liabilities in the amount of $2,388,914.  These consisted of accounts payable and accrued expenses in the amount of $2,041,979, accrued warranty in the amount of $26,535, notes payable to a related party in the amount of $175,000, customer deposits of $115,517, and the current portion of long term debt in the amount of $13,059.  Our working capital deficit as of September 30, 2010 was therefore $191,590.





In order to move forward with our business development plan set forth above, we will require additional financing in the approximate amount of $4,500,000, to be allocated as follows:





Initiate OEM Manufacturing
$2,000,000R&D Commercialization Costs
$500,000Expansion of Installation Business (3 new branches)
$1,500,000Additional working capital and general corporate
$500,000Total capital needs
$4,500,000





We will require substantial additional financing in order to execute our business expansion and development plans and we may require additional financing in order to sustain substantial future business operations for an extended period of time.  We currently do not have any firm arrangements for financing and we may not be able to obtain financing when required, in the amounts necessary to execute on our plans in full, or on terms which are economically feasible.  If we are unable to obtain the necessary capital to pursue our strategic plan, we may have to reduce the planned future growth of our operations.





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Off Balance Sheet Arrangements





As of September 30, 2010, there were no off balance sheet arrangements.





Going Concern





We have experienced recurring losses from operations and had an accumulated deficit of $879,532 as of September 30, 2010. To date, we have not been able to produce sufficient sales to become cash flow positive and profitable on an ongoing basis. The success of our business plan during the next 12 months and beyond will be contingent upon generating sufficient revenue to cover our costs of operations and/or upon obtaining additional financing. For these reasons, our auditor has raised substantial doubt about our ability to continue as a going concern.





Critical Accounting Policies
  The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America. Preparing financial statements in accordance with generally accepted accounting principles requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reported period.
  Accounts Receivable
  The Company performs periodic credit evaluations of its customers’ financial condition and does not require collateral. Trade receivables generally are due in 30 days. Credit losses have consistently been within management’s expectations. An allowance for doubtful accounts is recorded when it is probable that all or a portion of trade receivables balance will not be collected. The Company’s allowance for doubtful accounts totals $44,680 and $-0-, as of December 31, 2009 and 2008.
  Inventory
  Inventory is stated at the lower of cost or net realizable value. Cost is determined on an average cost basis; and the inventory is comprised of raw materials and finished goods. Raw materials consist of fittings and other components necessary to assemble the Company’s finished goods. Finished goods consist of solar panels ready for installation and delivery to customers.
  At each balance sheet date, the Company evaluates its ending inventory for excess quantities and obsolescence. This evaluation includes an analysis of sales levels by product type. Among other factors, the Company considers current product configurations, historical and forecasted demand, market conditions and product life cycles when determining the net realizable value of the inventory. Provisions are made to reduce excess or obsolete inventories to their estimated net realizable values. Once established, write-downs are considered permanent adjustments to the cost basis of the excess or obsolete inventory. The Company’s reserve for excess and obsolete inventory amounted to $-0- and $-0- as of December 31, 2009 and 2008.
  Property and Equipment
  Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the depreciable assets. The estimated useful lives used in determining depreciation are three to five years for tooling, five years for computers and vehicles, and five to seven years for furniture and equipment. Management evaluates useful lives regularly in order to determine recoverability taking into consideration current technological conditions.
  Maintenance and repairs are charged to expense as incurred; additions and betterments are capitalized. Upon retirement or sale, the cost and related accumulated depreciation of the disposed assets are removed, and any resulting gain or loss is recorded. Fully depreciated assets are not removed from the accounts until physical disposition. The estimated useful lives are as follows:
  Useful LifeAutomobile
5 YearsFurniture
7 YearsOffice Equipment
5 YearsMachinery
5 Year
  Long-Lived Assets
  In accordance with ASC 360, Accounting for the Impairment or Disposal of Long-Lived Assets, long-lived assets, such as property, plant, and equipment, and purchased intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by an asset to the carrying value of the asset. If the carrying value of the long-lived asset is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary.


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  Customer Deposits
 Customer deposits represent advance payments received for products and are recognized as revenue in accordance with the Company’s revenue recognition policy.
  Fair Value of Financial Instruments
 For certain financial instruments, including accounts receivable, accounts payable and accrued expenses, the carrying amounts approximate fair value due to their relatively short maturities. In the case of the notes payable, the interest rate on the notes approximates the market rate of interest for similar borrowings. Consequently the carrying value of the notes payable also approximates the fair value. It is not practicable to estimate the fair value of the related party notes payable due to the relationship of the counterparty.
  Operating Segments
 The Company operates in one operating segment.
  Revenue Recognition
 The completion of a solar installation project ranges from one to six months, thus the Company recognizes revenue of a system installation under the completed contract method of accounting. Revenue from installation of a system or sales of solar panels are recognized when (1) persuasive evidence of an arrangement exists, (2) delivery has occurred or services have been rendered, (3) the sales price is fixed or determinable and (4) collection of the related receivable is reasonably assured.
  Cost of Sales
 Cost of sales is comprised primarily of the cost of purchased product, as well as labor, inbound freight costs and other material costs required to complete products.
  Product Warranties
 The Company warrants its products for various periods against defects in material or installation workmanship. The manufacturers of the solar panels and the inverters provide a warranty period of generally 25 years and l0 years, respectively. The Company will assist its customers in the event that the manufacturers’ warranty needs to be used to replace a defective solar panel or inverter. The Company provides for a l0-year warranty on the installation of a system and all equipment and incidental supplies other than solar panels and inverters that are recovered under the manufacturers’ warranty. Maintenance services such as cleaning the solar panels and checking the systems are offered to customers twice a year without a separate service charge.
  The Company records a provision for the installation warranty within cost of sales, based on management's best estimate of the probable cost to be incurred in honoring its warranty commitment. The Company's warranty provision was $5,339 and $26,294, which was charged to cost of sales for the years ended December 31, 2009 and 2008.
  Advertising Expenses
 Advertising expenses are expensed as incurred. Total advertising expenses amounted to $20,478 and $29,985 for the years ended December 31, 2009 and 2008, respectively.
  Research and Development
 Research and development costs are expensed as incurred and amounted to approximately $35,000 and $-0- for the years ended December 31, 2009 and 2008, respectively. These costs are included in selling, general and administrative expenses in the accompanying statements of operations.
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  Recently Issued Accounting Pronouncements
 
 Our management has considered all recent accounting pronouncements issued since the last audit of our financial statements. Our management believes that these recent pronouncements will not have a material effect on our financial statements.





Item 3.        Quantitative and Qualitative Disclosures About Market Risk





A smaller reporting company is not required to provide the information required by this Item.





Item 4.      Controls and Procedures





We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of September 30, 2010.  This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer, Zhijian (James) Zhang and our Chief Financial Officer, Mandy Chung.  Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2010, our disclosure controls and procedures are effective.  There have been no changes in our internal controls over financial reporting during the quarter ended September 30, 2010.





Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.





Limitations on the Effectiveness of Internal Controls





Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving our objectives and our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective at that reasonable assurance level.  Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.





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PART II – OTHER INFORMATION





Item 1.     Legal Proceedings





Except as set forth below, we are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us:
 Trade Secrets Lawsuit
 
 On March 3, 2009, we filed a lawsuit against Yuming (Travis) Chou and Chenghsien (Ken) Hsieh for fraud, conversion, violation of the trade secrets act, violations of the business and professions code section 17200, and unjust enrichment. The lawsuit was filed in the Los Angeles Superior Court, and the case number is BC408968. Our counsel for this case is The Law Offices of Bin Li, PLC and its associate counsel, Jason J.L. Yang, Esq. We alleged that Chou and Hsieh, while employed at the Company, wrongfully took our trade secrets (consisting of customer contracts, customer lists, Sunvalley solar system designs, investment agreements, financial reports, and employee records) for the purpose of starting their own competing solar company. On May 22, 2009, Hsieh filed a cross-complaint against Sunvalley Solar, Inc. for rescission of 70,000 shares purchased by Hsieh (at the cost of $70,000), unpaid wages, and wrongful termination. Hsieh amended the cross-complaint on July 29, 2009, and withdrew the unpaid wages and wrongful termination claims on October 22, 2009. After we reached a settlement with Travis Chou, Mr. Chou was dismissed from the case on September 18, 2009. We amended our complaint on October 13, 2009 by adding two defendants – KYM Construction, Inc. and Tai Hai (Terry) Yu. On August 26, 2010, we reached a settlement with Chenghsien Hsieh. Mr. Hsien and other defendants were dismissed from the case.
 
 Our agent for service of process in Nevada is Val-U-Corp Services, Inc., 1802 North Carson St., Ste. 108, Carson City, NV 89701.


Item 1A.  Risk Factors





A smaller reporting company is not required to provide the information required by this Item.





Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds





None.





Item 3.     Defaults upon Senior Securities





None





Item 4.     (Removed and reserved)




Item 5.     Other Information





None





Item 6.     Exhibits





Exhibit

Number
Description of Exhibit3.1
Articles of Incorporation (1)3.2
Bylaws (1)31.1
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002





1
Incorporated by reference to Registration Statement on Form S-1 filed May 7, 2008.




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SIGNATURES





In accordance with the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.





Sunvalley Solar, Inc.Date:
April 8, 2011By:



Title:
/s/ Zhijian (James) Zhang

Zhijian (James) Zhang

Chief Executive Officer and Director